Impax Asset Management's "Impax US Sustainable Economy Fund" released its Q4 2025 investor letter. A copy of the letter can be downloaded here. The fund reported that equity markets remained volatile during the quarter amid concerns over elevated valuations and financing for large-scale data center investments, although the portfolio modestly outperformed the Russell 1000 benchmark on the back of sustainability tilts and stock-specific gains, particularly within Health Care and Financials. On an annual basi ...

Zoetis Inc. (NYSE:ZTS) is among the 7 Cheap Pharmaceutical Stocks to Buy According to Hedge Funds. Bank of America Cites Zoetis Inc.'s (ZTS) Strong Q4 Performance and Fiscal 2026 Outlook Zoetis Inc. (NYSE:ZTS) tops our list for being one of the cheap pharmaceutical stocks. TheFly reported on February 13 that Bank of America raised its price target for ZTS to $140 from $135 and maintained a Neutral rating on the shares. The upgraded target was supported by the company's fiscal 2026 projection and fourth- ...

Brendan, a Pennsylvanian by birth:-Completed a Ph.D. at Stanford University in the field of organic synthesis (2009). -Worked for a major pharmaceutical company (Merck, 2009-2013).-Worked in biotech including start-ups (Theravance/Aspira) prior to securing employment at Caltech.-First employee and co-founder of 1200 Pharma as it spun out of Caltech garnering major investment (into the 8 figures).-Remains an avid investor, focused on market trends and especially biotechnology stocks.Analyst’s Disclosure: I/w ...

Core Viewpoint - Zoetis reported strong fourth-quarter results that exceeded expectations, leading to a positive outlook for fiscal 2026, which has boosted investor sentiment [1][2] Financial Performance - The company achieved adjusted earnings per share (EPS) of $1.48 for the fourth quarter, surpassing analyst estimates of $1.40, driven by stronger-than-expected revenue and gross margins [1] - For fiscal 2026, Zoetis projected adjusted EPS in the range of $7.00 to $7.10, with the midpoint exceeding Wall Street's consensus estimate of $6.80 [2] Revenue Outlook - Revenue for 2026 is expected to be between $9.825 billion and $10.025 billion, modestly exceeding the consensus projection of $9.914 billion [2] Investor Sentiment - The solid quarterly performance and forward guidance have positively influenced investor sentiment, despite some analysts raising concerns about the composition of the earnings beat [2]

Financial Performance - Revenue for fiscal 2025 reached $9,467 million, representing a 2% increase from $9,256 million in 2024 and an 8% increase from $8,544 million in 2023[272] - Net income attributable to the company for fiscal 2025 was $2,673 million, an 8% increase from $2,486 million in 2024 and a 6% increase from $2,344 million in 2023[272] - Adjusted net income for fiscal 2025 was $2,847 million, up 6% from $2,693 million in 2024 and up 10% from $2,457 million in 2023[272] - Total revenue for 2025 was $9,467 million, an increase of $211 million or 2% compared to 2024, with operational revenue growth of $247 million or 3%[335] - Adjusted net income attributable to Zoetis for 2025 was $2,673 million, representing an 8% increase from $2,486 million in 2024[335] - Diluted earnings per share (EPS) for 2025 was $6.02, a 10% increase from $5.47 in 2024 and an 8% increase from $5.07 in 2023[383] Revenue Composition - Approximately 42% of the company's revenue for the year ended December 31, 2025, was denominated in foreign currencies, with 58% in U.S. dollars[288] - In 2025, the top two products, Simparica/Simparica Trio and Apoquel/Apoquel Chewable, contributed approximately 16% and 12% of total revenue, respectively, with the top five products accounting for about 42% of total revenue[294] - The company's ten top-selling products and product lines contributed 57% of total revenue in 2025[294] - Companion animal products generated $6,587 million in revenue, a 5% increase from $6,278 million in 2024, while livestock products decreased by 5% to $2,764 million[337] - The U.S. revenue segment generated $5,097 million in 2025, remaining stable compared to $5,074 million in 2024, while international revenue was $4,254 million, up 4% from 2024[337] Expenses and Costs - Cost of sales decreased to $2,666 million in 2025, accounting for 28.2% of revenue, down from 29.4% in 2024[340] - Selling, general and administrative expenses rose to $2,378 million, a 3% increase from $2,318 million in 2024[342] - Research and development (R&D) expenses primarily focus on new product development and regulatory approvals, although specific figures are not disclosed[297] - Research and development expenses increased by $12 million or 2% to $698 million in 2025 compared to 2024[344] - Amortization of intangible assets decreased by $13 million or 9% to $128 million in 2025 compared to 2024[346] Taxation - The effective tax rate for 2025 was 20.4%, slightly up from 20.3% in 2024[335] - Provision for taxes on income increased to $687 million in 2025, an 8% rise from $637 million in 2024, with an effective tax rate of 20.4%[357][358] - The effective tax rate on adjusted pretax income was 20.3% in 2025, up from 19.8% in 2024, primarily due to a lower benefit related to foreign-derived intangible income[381] Cash Flow and Liquidity - Net cash provided by operating activities was $2,904 million in 2025, a decrease from $2,953 million in 2024, primarily due to timing of receipts and higher inventory build-up[401] - Cash and cash equivalents increased to $2,312 million in 2025 from $1,987 million in 2024, reflecting improved liquidity[405] - Working capital rose to $4,533 million in 2025, compared to $2,574 million in 2024, indicating stronger operational efficiency[405] - The ratio of current assets to current liabilities improved to 3.03:1 in 2025 from 1.75:1 in 2024, demonstrating enhanced liquidity position[405] Debt and Financing - The company completed a private offering of $2.0 billion convertible senior notes on December 18, 2025, with a maturity date of June 15, 2029[412] - The net proceeds from the convertible senior notes offering were $1,970 million, which were used for stock repurchases and capped call transactions[414] - The company issued $850 million of 4.150% senior notes due 2028 and $1.00 billion of 5.000% senior notes due 2035, with net proceeds used to redeem $600 million of 5.400% senior notes and $750 million of 4.500% senior notes[417] - The company has a share repurchase program authorized for up to $6 billion, with $3.2 billion spent to repurchase 23.9 million shares in 2025, leaving $2.4 billion remaining under this authorization[424] Market and Competitive Environment - The animal health industry is influenced by factors such as human population growth, increasing pet owners' commitment to animal health, and economic development in emerging markets[273][274] - The company faces competition from both established market participants and new entrants, with significant impacts from generic competition on certain products[277] - Sales of livestock products may be adversely affected by disease outbreaks, which can reduce demand for animal-derived food products[287] Strategic Focus - The company is focused on innovation across its diverse portfolio, including vaccines, pharmaceuticals, diagnostics, and genetics, to address unmet needs in animal health[284][292] - The company emphasizes the importance of digital solutions and data insights as core decision drivers for future growth in animal health[301] - Sustainability initiatives focus on improving access to care for animals and reducing environmental impact through innovative solutions[301] - The company aims to enhance customer experience by integrating its product portfolio and reducing engagement frictions[301] Risk Factors - The financial results are subject to variability due to factors such as global macroeconomic conditions, competitive dynamics, and supply chain disruptions[302] - Interest expense decreased by $3 million, or 1%, in 2025 compared to 2024, attributed to higher capitalized interest and gains on foreign exchange derivatives[354] - Other (income)/deductions—net showed a loss of $36 million in 2025, worsening from a loss of $19 million in 2024, mainly due to a net loss on the sale of certain product portfolios[355]

Animal health firm Zoetis Inc. (NYSE:ZTS) on Thursday reported a fourth-quarter 2025 adjusted earnings per share of $1.48. The company beat the consensus of $1.40.The company reported sales of $2.387 billion, up 3% year over year, almost in line with the consensus of $2.36 billion. On an organic operational basis, revenue increased 4%.Adjusted net income was $648 million, an increase of 3% on a reported basis and 4% on an organic operational basis.Adjusted net income for the fourth quarter of 2025 excludes ...

Core Insights - Zoetis, Inc. (ZTS) reported fourth-quarter 2025 adjusted earnings of $1.48 per share, exceeding the Zacks Consensus Estimate of $1.40, and up from $1.40 in the same quarter last year [1] - Total revenues for the quarter increased by 3% year over year to $2.39 billion, surpassing the Zacks Consensus Estimate of $2.37 billion, compared to $2.32 billion in the prior year [1] Financial Performance - U.S. segment revenues decreased by 2% year over year to $1.24 billion, missing the Zacks Consensus Estimate of $1.27 billion [3] - Sales of companion animal products in the U.S. declined by 1% year over year to $1 billion, with growth in parasiticides and dermatology products offset by a decline in monoclonal antibody products for osteoarthritis pain [4] - Livestock product sales in the U.S. fell by 6% to $234 million, primarily due to the divestiture of the medicated feed additive product portfolio [6] - International segment revenues grew by 8% year over year to $1.12 billion, exceeding the Zacks Consensus Estimate of $1.06 billion [8] - Ex-U.S. sales of companion animal products rose by 7% to $599 million, driven by growth in key products [8] - Livestock product sales internationally increased by 9% to $522 million, supported by growth across core species [9] Full-Year Results and Guidance - For the full year 2025, Zoetis reported adjusted earnings of $6.41 per share, up from $5.92 the previous year, and total revenues of $9.47 billion, an increase of 2% year over year [10] - The company provided guidance for 2026, expecting adjusted earnings in the range of $7.00-$7.10 per share and revenues between $9.825 billion and $10.025 billion, indicating operational growth of 3-5% [11][13] Product Developments - Zoetis received EU approval for Lenivia, a long-acting monoclonal antibody therapy for canine osteoarthritis pain, with a commercial launch expected in 2026 [14] - The approval of Lenivia is anticipated to enhance Zoetis' position in the companion-animal biologics market and expand its offerings in the osteoarthritis segment [15]

Core Viewpoint - Zoetis (ZTS) reported fourth-quarter results that exceeded expectations, but the stock price declined due to concerns over its companion animals business, which faced increased competition [1] Group 1: Financial Performance - Sales and earnings per share (EPS) were 1% and 5% above market expectations, respectively, driven primarily by the strength in the livestock segment [1] - The livestock division's performance was a key factor in the better-than-expected sales, while the companion animals business underperformed [1] Group 2: Market Reaction - Despite the positive quarterly results, Zoetis stock tumbled, indicating investor focus on the challenges within the companion animals segment [1] - The market reaction suggests that investors are concerned about the competitive landscape affecting Zoetis' performance in the companion animals sector [1]

Financial Data and Key Metrics Changes - For the full year 2025, the company reported global revenue of $9.5 billion, growing 2% on a reported basis and 6% on an organic operational basis, with 4% from price and 2% from volume [21][22] - Adjusted net income grew 6% on a reported basis and 7% on an organic operational basis to $2.8 billion [21][22] - Full year adjusted gross margin of 71.9% grew 120 basis points on a reported basis, with foreign exchange having a favorable impact of 80 basis points [39] Business Line Data and Key Metrics Changes - The companion animal portfolio grew 5% operationally, with the Simparica franchise reporting $1.5 billion in revenue, growing 12% operationally [22][24] - The livestock portfolio achieved $2.8 billion in revenue, reflecting 8% organic operational growth, driven by broad-based growth across geographies and species [24][30] - Companion animal diagnostics delivered 13% operational revenue growth, supported by the launch of new products like Vetscan OptiCell and Imagyst [16][23] Market Data and Key Metrics Changes - International markets contributed significantly, with 8% organic operational revenue growth, while the U.S. delivered 4% organic operational growth [7][21] - International companion animal revenue grew 7% operationally, driven by the Simparica and key dermatology franchises [28] - The international livestock portfolio grew 10% on an organic operational basis, with strong performance in cattle and poultry markets [30] Company Strategy and Development Direction - The company is focused on advancing long-acting approvals and maintaining a robust pipeline to extend growth opportunities [8][19] - Strategic actions are being taken to sustain growth through competition, including optimizing channel mix and reinforcing scientific leadership [9][20] - The company aims to leverage its diverse portfolio and robust pipeline, with 12 potential blockbusters in development [19][20] Management's Comments on Operating Environment and Future Outlook - Management noted that while there are economic pressures affecting pet owners, demand for animal health services remains strong [10][71] - The company expects gradual improvement in the macro environment as it moves through 2026, with guidance for 2026 set at 3%-5% organic operational revenue growth [18][42] - Management emphasized the importance of innovation and strategic execution in navigating competitive pressures [19][20] Other Important Information - The company completed a convertible bond offering to support a $1.75 billion common stock buyback while maintaining a strong balance sheet [42] - A multi-year initiative to transition the ERP system is underway to enhance operational efficiency and reporting capabilities [38] Q&A Session Summary Question: Competition and Pricing Dynamics for 2026 - Management acknowledged the competitive landscape and the impact of aggressive promotions on growth, particularly in the dermatology space [50][51] - Price increases are expected to return to a normal range of 2%-3%, with volume contributing to growth as well [52] Question: U.S. Companion Animal Operational Growth - The guidance incorporates current market conditions and the company's strong portfolio, with expectations for continued demand despite competitive pressures [55][56] Question: Dynamics of Simparica Trio Growth - Management highlighted the significant room for expansion in the triple combination space, with expectations for continued growth in 2026 [62] Question: Revenue Recognition and Accounting Changes - Management clarified that operational changes have resulted in some revenue deferrals, which will be factored into future guidance [61][63]

Financial Data and Key Metrics Changes - For the full year 2025, the company reported global revenue of $9.5 billion, growing 2% on a reported basis and 6% on an organic operational basis, with 4% from price and 2% from volume [21][22] - Adjusted net income grew 6% on a reported basis and 7% on an organic operational basis to $2.8 billion [21][22] - Full year adjusted gross margin of 71.9% grew 120 basis points on a reported basis, with foreign exchange having a favorable impact of 80 basis points [39] Business Line Data and Key Metrics Changes - The companion animal portfolio grew 5% operationally in 2025, with the Simparica franchise reporting $1.5 billion in revenue, growing 12% operationally [22][24] - The livestock portfolio achieved $2.8 billion in revenue, reflecting 8% organic operational growth, driven by broad-based growth across geographies and species [24][30] - Companion animal diagnostics delivered 13% operational revenue growth for the year, supported by the launch of new products [16][23] Market Data and Key Metrics Changes - International markets contributed significantly, with 8% organic operational revenue growth, while the U.S. delivered 4% organic operational growth [7][21] - The international companion animal business grew 7% operationally, driven by the Simparica and key dermatology franchises [28][30] - Livestock performance was particularly strong in the Brazilian cattle market, with broad-based growth across all core species [30][37] Company Strategy and Development Direction - The company is focused on advancing long-acting approvals and maintaining a robust pipeline to extend growth opportunities [8][19] - Strategic actions are being taken to sustain growth through competition, including optimizing channel mix and reinforcing scientific leadership [9][10] - The company aims to leverage its diverse portfolio and innovative capabilities to drive long-term growth and value creation [20][46] Management's Comments on Operating Environment and Future Outlook - Management noted that while there are economic pressures affecting pet owners, demand for animal health services remains strong [10][71] - The company expects gradual improvement in the macro environment as it moves through 2026, with guidance for 2026 set at 3%-5% organic operational revenue growth [18][42] - Management remains confident in the long-term fundamentals of the livestock market, driven by increasing protein consumption and favorable producer economics [18][30] Other Important Information - The company completed a convertible bond offering to support a $1.75 billion common stock buyback while maintaining a strong balance sheet [42] - A multi-year initiative to transition the ERP system is underway, aimed at enhancing operational efficiency and insight [38] Q&A Session Summary Question: Competition and Pricing Dynamics for 2026 - Management acknowledged the competitive landscape and the impact of new product launches on growth, particularly in the dermatology space [50][51] - Price increases are expected to return to a normal range of 2%-3%, with volume contributing to growth as well [52] Question: U.S. Companion Animal Operational Growth - Management indicated that the guidance incorporates current market conditions and the strength of the company's portfolio, despite competitive pressures [55][56] - The demand for animal health remains resilient, with consumers prioritizing spending on their pets [56][71] Question: Dynamics of Simparica Franchise Growth - The Simparica franchise continues to lead in the U.S. market, with significant room for expansion despite recent lower growth rates [62] - Management emphasized the importance of maintaining a strong market position and adapting to competitive pressures [62] Question: Revenue Recognition and Accounting Dynamics - Management clarified that operational changes have led to some revenue recognition shifts, which are factored into the guidance for 2026 [61][63] - The one-month lag in revenue recognition will be addressed with the implementation of fiscal year alignment in early 2026 [61][63]